The Medicare tax rate and how it's calculated

Medicare tax is a payroll tax that comes out of your wages if you work, or that you pay directly if you're self-employed. The rate is fixed: 2.9% of your wages, split evenly between you and your employer. If you work for someone else, you pay 1.45% and your employer pays 1.45%. If you're self-employed, you pay the full 2.9% yourself.

There is no income limit on Medicare tax — it applies to all your wages, no matter how much you earn. This is different from Social Security tax, which stops once you reach a certain income threshold each year. Medicare tax keeps going on every dollar you make.

If you earn more than $200,000 as a single filer (or $250,000 if married filing jointly), there's an additional 0.9% Medicare tax on the income above that threshold. This extra tax applies to both employees and self-employed workers, and it has no employer match — you pay it all.

Key Takeaways

  • The standard Medicare tax rate is 2.9% of wages, split evenly between employee and employer at 1.45% each.
  • Self-employed workers pay the full 2.9% themselves, though they can deduct half of it on their tax return.
  • Medicare tax has no income cap — it applies to all your wages, unlike Social Security tax.
  • An additional 0.9% Medicare tax applies to wages above $200,000 (single) or $250,000 (married filing jointly), and you pay this extra amount yourself.

How Medicare tax appears on your paycheck

If you're an employee, you'll see Medicare tax listed separately on your pay stub. It's usually labeled "Medicare" or "Med Tax" and shows the 1.45% amount deducted from your gross pay. Your employer also pays 1.45% on your behalf, but that amount doesn't appear on your paycheck — it's a cost to them.

The deduction happens automatically with every paycheck. You don't have to do anything to start paying it; your employer's payroll system handles it. If you have multiple jobs, Medicare tax is calculated on the wages from each job separately, so you could end up paying more than 2.9% total across all your employers.

When you file your taxes each year, Medicare tax is already accounted for in what you've paid. If you earned more than the high-income threshold, you'll owe the additional 0.9% tax, which you report on your tax return.

Self-employed workers and Medicare tax

If you're self-employed, you pay both the employee and employer portions of Medicare tax — the full 2.9%. You calculate this on your net self-employment income (your business income minus business expenses) using Schedule SE when you file your taxes.

The good news is that you can deduct half of your self-employment tax on your tax return, which reduces your taxable income. So while you pay 2.9%, you only report half of it as a tax-deductible expense. This is the government's way of treating self-employed workers more like employees, who don't pay the employer portion out of their own pocket.

If your self-employment income is high enough to trigger the additional 0.9% Medicare tax, you'll owe that on top of the standard 2.9%. You report this extra tax on Form 8959 when you file.

What Medicare tax pays for

Medicare tax funds the Medicare program, which provides health insurance to people age 65 and older, some younger people with disabilities, and people with end-stage renal disease. The tax you pay now goes into the Medicare Hospital Insurance Trust Fund, which covers Part A benefits (hospital stays, skilled nursing, hospice, and home health).

Part B (doctor visits and outpatient services) and Part D (prescription drugs) are funded differently — through general tax revenue and beneficiary premiums. But the payroll tax you see on your check is specifically for Part A.

Medicare tax if you're retired or receiving Social Security

If you're already retired and not working, you don't pay Medicare tax on wages because you have no wages. You may, however, pay Medicare premiums for Part B and Part D coverage, which are separate from the payroll tax.

If you continue to work past age 65 — whether full-time or part-time — you still pay Medicare tax on those wages. Working and collecting Social Security at the same time doesn't change your Medicare tax obligation; it's based on your earnings, not your benefit status.

Some retirees work as independent contractors or have side income. That self-employment income is still subject to the 2.9% Medicare tax (plus the additional 0.9% if you cross the income threshold).

High earners and the additional Medicare tax

The additional 0.9% Medicare tax applies to wages above $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately. These thresholds have not changed since the tax was introduced in 2013.

If you're an employee, your employer is responsible for withholding this extra tax once your wages cross the threshold. If you have multiple employers, each one withholds based only on what they pay you, so you might overpay and need to claim a refund when you file your taxes.

Self-employed workers calculate the additional 0.9% tax themselves on Schedule SE and pay it with their tax return. If you have both W-2 wages and self-employment income, you need to combine them to see if you've crossed the threshold.

Understanding your Medicare tax on your tax return

When you file your annual tax return, Medicare tax is already accounted for in the withholding shown on your W-2 form (for employees) or calculated on Schedule SE (for self-employed). You don't usually need to do anything extra unless you owe the additional 0.9% tax or you're self-employed.

If you're self-employed, you'll use Schedule SE to calculate your self-employment tax, which includes both Social Security and Medicare portions. The Medicare portion is 2.9% of your net self-employment income. You then transfer this amount to your main tax return.

If you had multiple employers or high income, check your W-2 forms to see how much Medicare tax was withheld from each job. If the total exceeds what you actually owe, you'll get a refund when you file.

Frequently Asked Questions

Do I pay Medicare tax if I'm over 65 and still working?

Yes. Medicare tax is based on your earnings, not your age. If you're working and earning wages, you pay 1.45% (or 2.9% if self-employed) regardless of how old you are. The tax continues as long as you have income from work.

What if I have two jobs — do I pay Medicare tax on both?

Yes. Each employer calculates and withholds Medicare tax on the wages they pay you. There's no limit, so if you earn $100,000 at one job and $50,000 at another, you pay Medicare tax on the full $150,000. If your combined income exceeds the high-income threshold, you may owe the additional 0.9% tax.

Can I avoid paying Medicare tax?

No. Medicare tax is mandatory for all workers with earned income. There are no exemptions based on age, income level, or religious beliefs. The only way to not pay it is to have no earned income.

Is Medicare tax the same as a Medicare premium?

No. Medicare tax is a payroll tax that funds the Medicare program. Medicare premiums are what you pay each month for Part B (doctor visits) and Part D (prescription drugs) coverage once you're enrolled. They're separate costs.

How much Medicare tax will I have paid by the time I turn 65?

This depends on how much you've earned over your working years. There's no way to calculate a single number because the rate has been the same (2.9%) since 1966, but your earnings have likely changed. Your Social Security statement shows your lifetime earnings record, which you can use to estimate your total contributions.